LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal capital structure. Its outstanding bonds have a 12 percent coupon, paid semiannually, a current maturity of 17 years, and sell for $1,162. It has 100,000 bonds outstanding. The firm can issue new 20-year maturity semiannual bonds at par but will incur flotation costs of $50 per bond (Hir the coupon rate on the new bonds = the YTM on existing bonds). The firr could sell, at par, $100 preferred stock that pays a 12 percent annual dividend that is currently selling for $120. The firm currently has 1,000,00
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
![LUVFINANCE, Inc. is estimating its WACC. It is operating at its optimal
capital structure. Its outstanding bonds have a 12 percent coupon, paid
semiannually, a current maturity of 17 years, and sell for $1,162. It has
100,000 bonds outstanding. The firm can issue new 20-year maturity
semiannual bonds at par but will incur flotation costs of $50 per bond (Hint:
the coupon rate on the new bonds = the YTM on existing bonds). The firm
%3D
could sell, at par, $100 preferred stock that pays a 12 percent annual
dividend that is currently selling for $120. The firm currently has 1,000,000
shares of preferred stock outstanding. Rollins' beta is 0.89, the risk-free
rate is 3.54 percent, and the market risk premium is 6 percent. The
common stock currently sells for $100 a share and there are 5,000,000
shares outstanding. The firm's marginal tax rate is 40 percent. What is the
WACC?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F68d1b780-f46f-41f7-8b91-4823219e7797%2Fd7ef84a0-9439-44a5-a5a5-f0549f673f5d%2Fj1hgh8u_processed.jpeg&w=3840&q=75)
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